Decorative Concrete produces a concrete overlay for residential and commercial concrete flooring. Customers have complained that one of the products results in excessive cracking. The likelihood the company will incur a loss on this product is probable and the amount of the loss is estimated to be somewhere between $1.5 and $3 million.

1. Should this contingent liability be reported, disclosed in a note only, or both? To be reported To be disclosed Both

2. What loss, if any, should Decorative Concrete report in its income statement?

3. What liability, if any should Decorative Concrete report in its balance sheet?

4. What entry, if any should be recorded in the journal?